Podcast #1,014: The Habits of Highly Effective Risk-Takers

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Brett McKay: Brett McKay here, and welcome to another edition of The Art of Manliness podcast. You may know Nate Silver as an election forecaster, but he’s a poker player as well, and his experiences operating in a world of competition and risk led him to explore what his fellow gamblers, as well as hedge fund managers, venture capitalists, and many other kinds of maverick types, do differently than other people. Amongst the findings Nate shares in his new book, “On the Edge: The Art of Risking Everything,” are the 13 habits of highly effective risk-takers. Nate and I discussed some of these habits today on the show, including exercising strategic empathy, avoiding the pitfalls of resulting, taking a razor fold stance towards life, and more. After the show’s over, check out our show notes at AoM.is/risktakers. All right, Nate Silver, welcome to the show.

Nate Silver: Thank you so much, Brett.

Brett McKay: So people probably know you as the election forecaster, but what they might not know is you’ve had a career as a professional poker player. Tell us about that.

Nate Silver: Yeah, so I was one of the, at that point, relatively young kids, I guess I was in my late 20s during the poker boom era, which was launched with Chris Moneymaker, who was this amateur who won the World Series of Poker in 2003 and the boom in internet poker. So I went to college, had a consulting job out of college that, frankly, I kind of hated. But a friend at the workplace was getting a poker game started, and being a competitive guy, I started practicing online, playing free poker, and free poker doesn’t really work. No one has an incentive to actually play well. So somehow I roped myself into actually depositing money at one of the more janky online sites and somehow just started winning money. I think the reason why is that there were so many new players to the game that there were a lot of fish, as we call them in poker, kind of suckers, kind of the blind leading the blind. Being slightly better than mediocre at this point in time was still enough to be relatively good relative to the field. And before long, I was staying up all night to play and kind of taking a taxi to work and getting in half an hour late and barely knew how to make the printer work and things like that.

And so I left my consulting job to play poker and then help run a site called Baseball Prospectus with sports forecasting.

Brett McKay: So you got a new book out called “On the Edge,” and you talk about how your career in election forecasting, polling, and gambling are connected by a world that you call the river. What is the river?

Nate Silver: So the river refers to a community of like-minded people. It’s basically people that have two characteristics. One is that they’re really analytical, so they’re kind of in the quantitative, maybe more moneyball mentality. They’re trying to put numbers on things, they’re trying to estimate things, but that’s paired with being really competitive. So risk-taking, they are sometimes a little bit contrarian. They kind of are lone wolves who make their own way in life. And this skill set, which is pretty unusual, if you look at kind of personality typologies, then oftentimes people who are quantitative are kind of risk averse. And, you know, they’re maybe accountants or something where they play it pretty safe. But when you take these two elements and combine them, the risk-taking gene, so to speak, and I think it probably is partly genetic, with the analytical ability, that can take you pretty far or lead to ruin potentially, too. But those types of people, I think, are, for better or worse, the people who tend to end up on the tails of the bell curve, the people that sometimes in venture capital or poker or investing or different things or sports betting.

That’s a powerful skill set in today’s economy.

Brett McKay: Yeah, you talk about, you go into different areas where you see these two qualities. So gambling is one, poker playing, sports gambling, but you also look at the world of VC funders as well.

Nate Silver: Yeah, I mean, if you talk about people who are extremely competitive, I talked to a lot of the top venture capitalists in Silicon Valley, and they love to compete, even though they might not need the money anymore, even though they’ve already been really successful, they often have a chip on their shoulder. That’s one thing that also defines people in this world, is they tend to be often pretty self-motivated. Right. They’re not the people who are going to say, okay, I made a good living. I’m going to go retire in Tuscany or something. They want to keep battling and keep fighting, sometimes to their own detriment. I mean, I think you can certainly be too competitive for your own good. And although most people are probably too risk averse, you’ll meet people in the book who are way too far on the other extreme.

Brett McKay: So what you do in this book is you take readers on a deep dive into the world of the river. So you talk to gamblers, poker players, hedge fund managers, VC guys. You talk to the cryptocurrency guy that just blew up, that Sam Bankman-Fried guy. And you do this to help readers understand how these people, who are deeply analytical, highly competitive, have a high tolerance for risk and uncertainty, how they operate. But you have this great section, and it was sort of an interlude into this tome of a book you wrote that I really enjoyed. It’s called “The 13 Habits of Highly Successful Risk-Takers.” And I want to focus on this ’cause I thought it was. Thought it was really useful. And in this section, you expand out from talking to people in the traditional river community. So who did you talk to to figure out the habits of highly successful risk-takers?

Nate Silver: So in this section of the book, most of the people, like I mentioned, are like quantitative types, but I also wanted to talk to people who take physical risks and different types of risks outside of the kind of finance, crypto betting space. So I talked to, literally an astronaut. Kathryn Sullivan was one of the first woman astronauts. She was picked out of like literally 10,000 people, a class of like a dozen. So she’s quite a remarkable person. I talked to a former NFL player named Dave Anderson. I talked to a guy who was literally an explorer and climbs mountains. He’s been in outer space and things like that. He’s taught at the Top Gun Academy. And what I found is that they actually had more in common with the quantitative risk-takers than I thought. The ability to be cool under pressure. If you’re up 29,000 feet on some mountain where you’re literally in outer space, then you can’t panic when you’re facing stress.

You have to be capable of making good decisions under pressure. And they have courage, too. I mean, Kathryn Sullivan was an astronaut at the time of the space shuttle Challenger disaster. And before each mission for NASA at that time, you actually talk to your family beforehand and kind of say a conditional goodbye.

And she would say, look, they’re putting me on a rocket ship and beaming me out to outer space. This might not end well. It hasn’t always ended well with Apollo or Challenger or things like that. So I just want to let you know that, like, if something bad happens, and I knew the risks I was taking, and I was doing this for the love of exploration and the good of my country and everything else. So they’re very impressive. Very impressive people.

Brett McKay: Yeah. Well, let’s talk about that first habit you found that these people who take physical risk have in common with the people in the river, these analytical, highly competitive people. And you mentioned that cool under pressure. And you talk about this in the book, like, what happens to our minds and bodies when we engage in risky behavior? And you talk about your own experience, phenomenologically, what you experience. So tell us what happens to our minds and bodies when we’re taking part in risk?

Nate Silver: So look, we are trained through lifetimes and eras and eras of evolution to have a stress response. If you’re playing poker in a $1, $2 game and the stakes are low to you, then you’re just not going to have the same stress response as when you’re playing like a $50, $100 game or you’re at the final table in some major tournament. And the key is learning how to handle that different operating system that you may find yourself suddenly engaged with. ‘Cause it’s not, by the way, being totally cool and not experiencing any stress. If you look at, for example, I talked to a guy who was actually a golf instructor, of all things and has worked with professional golfers. And he said that, like, you might think of golf as a relatively laid-back sport, but PGA golfers have an elevated heart rate when they’re playing. Even when they’re just kind of walking from the fairway to the green or something like that. They’re pumped up and the athletes that have learned to deal with the stress can actually get, I mean, in the zone. It’s actually a real thing. Like Michael Jordan talked about back in the day, where things are elevated.

You have heightened perceptual awareness. Your heart rate is faster. Some people are kind of love that environment. They love dealing with the pressure. They feel like the world is moving more slowly and they’re thinking clearly. And so it’s a rare trait, but that is common between people who take financial risks and people who take physical risks. If you look at traders, for example, on Wall Street, when there’s some big news that breaks about a stock or position they’re taking, their heart rates get elevated too. Their testosterone production changes and things like that. This is partly why you can have bubbles in the market, is that people are experiencing physiological responses. But look, I’m mostly a mind guy, mostly a quantitative guy, but our bodies give us important feedback too. And by the way, if you look at poker players now, not all of them, but a lot of them are pretty self-conscious about their health routines. They understand that being under stress is taxing on your body and paying attention and actually watching what your opponents are doing is actually quite taxing. Poker is a physical game, at least played in real life and not on the internet and things like that.

And so, look, I’m not saying it’s like the healthiest population in the world, but we’re a long way removed from the days of, like, donuts and whiskey at the tables.

Brett McKay: Yeah. What do you do to manage your stress response when you’re playing a high-stakes game?

Nate Silver: I mean, there’s some stuff that’s kind of basic. I mean, I think breathing deeply. I think one thing that’s important is, like, slowing down a bit. I mean, I tend to be a pretty quick decision-maker about lots of things, but slowing down and saying, I’m going to take my time and be in a rhythm with these decisions and really kind of watch what my opponents are doing, that’s pretty important. I mean, I think also, you always want to be playing for stakes that you can afford to lose. You don’t want to go on tilt because your whole life has been upended by a poker game. So you have to kind of find the right pressure point where you feel real stress, but you also have a safety net underneath you. And that is true in poker. In outer space or something, you don’t have a complete safety net. Or climbing a mountain in the Himalayas, you don’t have a complete safety net. But in poker, it’s kind of just for trial and error. Learning that pressure point where you play optimally.

Brett McKay: What does it mean to go on tilt? That’s a phrase you see in poker a lot. What does that mean?

Nate Silver: So going on tilt means responding emotionally in an unhelpful way. The most common form of it is if you take a bad beat and then you get really angry about that, and then you punt off. There’s a term we’d use the rest of your chips. But there are other types of tilt. There’s boredom tilt. If you’re not getting a lot of hands, you may start to overplay certain things. There’s entitlement tilt. Sometimes if you win a lot of money, you feel like you’re God’s gift to poker all of a sudden, notwithstanding the fact you probably just caught some good lucky cards and you get very mad when all of a sudden your luck reverts back to the mean. And I’ve seen a lot of guys late in tournaments or in high-stakes cash games where they’ll start out really well at the beginning of the night, build up a big stack, and then lose a pot via a bad beat, or they get outplayed or something, and then they go on tilt, and all of a sudden, the guy who was a chip leader is on the rail out of the tournament 45 minutes later.

People really struggle with literally counting their chips before it’s time to cash them in, and then feeling like they are now lower than the kind of peak they experienced before and going into a downward spiral. It’s a real thing.

Brett McKay: And this can happen in other areas besides poker. I mean, a businessperson who’s like, hey, I’m on this hot streak. I’m awesome. And they just take these unnecessary risks and it just blows up in their face. It reminds me, I’m watching Lawrence of Arabia right now. Have you seen that movie?

Nate Silver: I have not.

Brett McKay: Okay, well, there’s this part where he actually starts to think that he’s like God, basically, and he’s unbeatable, and then he just gets his butt kicked. So he went on tilt.

Nate Silver: Yeah. No, and look, people can have, I think, a God-like complex sometimes, right? If you’re Elon Musk and you wake up and you’re like the richest person out of 50 billion people, or however many it is that have ever lived, then that’s probably a little bit weird. You’re probably pinching yourself and being like, is this real life? Or what’s happening exactly? And dealing with outlier success is something that I think also is something that is hard. I mean, obviously, it’s a problem you’d love to have, but that doesn’t mean it’s a straightforward thing to deal with either.

Brett McKay: Yeah. A good takeaway there is you have to be cool under pressure, and pressure could be when things are going against you, but also when things are going for you. That’s a different kind of pressure as well. Can cause you to do dumb things.

Nate Silver: For sure. I mean, it’s how you do in the high-stakes moments. And by the way, one theme I heard over and over again is that you don’t want to try to be a hero. Right? So the ex-NFL player I talked to, he said, well, look at, look at when people, he’s a big sports science guy. Look at when players get injured in the NFL, it’s often in the high-pressure moments. So, like interceptions, fumbles, kick returns, punt returns, where there’s a lot of leverage and a lot of things happening at once. And guys get out of their routines, they try to do something heroic with 80,000 fans screaming at them or something, and they wind up overextending themselves and not executing the basic A, B’s, and C’s and getting hurt. If you can just execute your baseline training and game plan under pressure like that’s going to get you further than 95% of people. And, yeah, there probably are a few people who experience some elevated in-the-zone, maverick-level kind of performance, but just executing under difficult circumstances and not thinking too far ahead goes a long way.

Brett McKay: Yeah. You have this mantra that this guy talked about, don’t be a hero, just do your job. I think that’s really useful.

Nate Silver: Just do your job. Absolutely.

Brett McKay: So another habit you talked about, you mentioned successful risk takers have courage, and you describe this courage as residing between competitiveness and confidence. Why is courage the word you settle on to describe this stance towards life?

Nate Silver: Look, I talked to a lot of people in this book who are making their own way in life, right? You know, one of the best poker players I talked to is named Maria Ho. She, by the way, is uncanny, fantastic at reading people. She is able to have conversations with people to get very natural streaming conversations while she’s in the middle of a poker hand, which is actually pretty difficult. It’s a different part of your brain that you’re using. And, you know, she grew up in an Asian American family where I don’t mean to stereotype too much, but by her own words, her parents want her to become a doctor or something like that. And she was like, F this, right? She kind of bribed her way into, like, her college dorm poker game by bringing over a bunch of beer ’cause all the guys were ignoring her on poker night and things like that. And, you know, she’s someone who has made her own way and is not afraid of anybody and goes toe to toe and often wins against the best players in the world. So I do think there’s an element here of courage.

It’s also, you know, overconfidence is very risky when you’re doing something like playing poker. You know, it’s a difficult game. You’re playing as other skilled opponents. And so, you know, part of it is being self-aware. But I do think some of it comes down to being willing to take chances that have what I call a positive expected value, meaning it won’t always work out. But over the long run, if you made that decision 100 times, that you would wind up in a better place more often than not. And a lot of people are very risk-averse. I mean, look, for many years, I mean, people just barely eked out a living, and the average human lifespan was 39 years or whatever, and you get a disease and it would kill you or something like that. And now we live in a world where there’s a lot more abundance, but people still can have, like, a scarcity mindset and do things that they think are risk-averse but actually put them at more risk of falling or failing out of success in the long run because they’re too unwilling to make a change at a time when that would be good for them.

Brett McKay: You know where I’ve seen that idea of being risk-averse actually set you up for more harm? Skiing. So whenever I first learned, I went really slow and I was being really way too careful, and I was just falling down all the time. Finally, my instructor told me, you’d actually do better and are safer if you go faster. Like, being too careful is what messes you up and makes you fall down. So he said, you just got to kind of go for it. And it’s true.

Nate Silver: Absolutely. Or another context where it comes up is in. I talked to HR McMaster, who’s a former, whatever, multi-star general, and he says, in war, you can’t just stand still. Right. If you’re in the middle of a battle, you often face situations where you have to charge forward or retreat. And it sometimes can be hard to know whether charging forward or retreating is better. Sometimes it’s better to kind of literally or proverbially fold your hand, so to speak. But standing there and being indecisive is by far the worst of those three actions a lot of the time. And people freeze. You know, fight or flight is actually not the worst response because freezing in the face of stress is often the option that gets you in the most trouble.

Brett McKay: Yeah. You talk about this idea of having a chip on your shoulder. A lot of these people you talk to have got a chip on their shoulder. Why do you think they do? Why do they kind of walk around with this idea that they’re kind of the underdog and they’ve got something to prove?

Nate Silver: So a lot of them have some degree of childhood trauma. I mean, Elon Musk had a difficult childhood. Jeff Bezos was adopted. I mean, it’s usually, you know, it’s people who are good at milking grievance or challenges sometimes, but they’re people that feel like they have to… They constantly have to prove themselves and maybe go overboard, frankly. Right. I mean, we are, by the way, talking about the people who are extreme outliers very far on the tail of the curve, where they keep doubling down over and over again, kind of even when they’ve already won, which may not be healthy, necessarily, but in a world of 8 billion people, if you’re talking about, like, the 100 richest people in the world or 100 most successful, then they both have to be lucky and good and insanely risk-taking. These are not like trust fund kids who are just kind of living out their life in Tahiti or something. They’re people that often were upper middle class. They had certainly some degree of privilege, often a considerable degree, but they kept gambling and keep gambling even when they’ve already won.

Brett McKay: When have you seen this chip on your shoulder become a hindrance? Like, what are some people? Or you’ve seen that become a problem for him?

Nate Silver: I mean, Sam Bankman-Fried is one example of somebody who was willing to take insane levels of risk. I mean, obviously, he also had issues with fraudulent premises for his company and how he was using user funds in FTX. But he’s someone who almost had a borderline death wish. And I’m using that term deliberately because, I mean, he kind of literally told me, this is before he got into trouble in terms of bankruptcy and being a convicted felon on seven felony counts, whatever it is and everything else. Right? He told me that if you’re not willing to risk ruining your life, then you’re not taking enough risk.

And that’s the wrong message. We’re talking about calibrated, calculated risk-taking. And courage is a part of it because most people left with their own devices are too risk-averse. But he’s someone who goes way too far in the other direction. You know, his parents are academics who have a particular philosophy of life. I’m not sure if he had trauma or whatever else. He’s somebody also who didn’t have, like, a good network of friends to help bring him in. So he ran his business out of the Bahamas, which are kind of further removed than you’d think from the rest of society.

I mean, he’s in a compound on the other side of the island from where most of the tourists are. His girlfriend’s running his hedge fund. His parents work for him. So he doesn’t have any buddies to like to say, “Hey, man, you’re going a little too far with this stuff,” and that can be very dangerous.

Brett McKay: This seems less of an example of having a chip on your shoulder, and more just hubris. It seems like Sam Bankman-Fried had this idea of himself as this wonder kid, and he developed almost this God complex like he could never lose. And that just made him really make decisions that just kept on snowballing. And then he went on tilt.

Nate Silver: Went on mega epic tilt. Yeah.

Brett McKay: Yeah. Okay, so another habit you talk about is successful risk-takers have strategic empathy. And you talked to HR McMaster about this. What is strategic empathy?

Nate Silver: It’s the ability to see the world or the quote-unquote game in your opponent’s shoes. And this is important. I mean, I think one habit people have is to treat other people as what, in video game terms you call non-player characters, people that don’t have agency or don’t have the ability to make decisions on their own. But when you’re in a really competitive field, whether it’s venture capital or poker or sports betting or the military battleground, you’re dealing with actually some of the smartest and brightest people in the world, and they are capable of adapting and adjusting to the situation. And so understanding how they think and kind of, to use a more technical term, what the equilibrium is when everyone’s playing their best, and, like, where can you hold your ground? Where can you attack? But, you know, we’re not talking about the most touchy-feely people in the world, Brett. It’s like, not that type of empathy, but saying, if I were in my opponent’s position, how would I play this poker hand, for example? And then reciprocating that back in your hand and going through the iterations of that. That’s like, basically what, like, computers do when they’re playing poker.

They simulate back and forth one person’s action, and people makes adjustments, and they adjust and adjust and adjust until you get to some optimum point in a very competitive world. That’s how it works. There usually isn’t free money just lying on the ground for taking. You have to… You have to play your best and assume your opponents are playing their best also.

Brett McKay: Yeah, you kind of be a little. You have to have the empathy of a psychopath, almost. It’s like, it’s not that. Like, you’re, like, feeling like, “Oh, I feel bad that they feel bad.” It’s like, well, I’m just. What would this person do? So I can kick their butt?

Nate Silver: Yeah. I don’t know if I quite call it being a psychopath. I mean, I do think in poker in particular, like, the emotional empathy part probably is good too. The other day, I was playing in a fairly high-stakes game, and my friend had been having a rough night, and I thought I could bluff him out of a pot where he was probably supposed to call. And much to his credit, it didn’t work. He had the presence of mind to know that, like, “Hey, I know that I’m having a rough night. I know Nate knows that. Therefore, I know that Nate may be trying to exploit that by getting me to fold a pretty good hand. Therefore, I call.” And so he won a lot of money from me. So that’s a good example of him one-upping me in strategic empathy.

Brett McKay: Yeah. One way you can develop strategic empathy is practice. We did a whole podcast about this, but red teaming, where you try to figure out how to beat yourself. Like, how would the competition beat you? And, like, simulate that. We’re gonna take a quick break for your word from our sponsors. And now back to the show. Okay. Another habit you talk about is that risk-takers are process-oriented and not results-oriented. And you talk about this in the book. We’ve also had Annie Duke on the podcast talk about this idea of resulting. For those who aren’t familiar, what is resulting in poker and why is it bad?

Nate Silver: Yeah. So, in poker, generally speaking, if you can get your money in as, like, a 60% favorite, 60, you’re pretty thrilled with that. That leads to a very high return on investment in the long term. You’re still going to lose 40% of the time. In fact, some players might say I’ll take a 53-47 edge. You’ll lose almost half the time. The edges are thin and very competitive games like poker or sports betting. So, in poker, you kind of learn this the hard way because you’ll have many hands where you get all in and you have, like, three of a kind, and your opponent has a flush draw, and you’re supposed to win that hand about 65% of the time. But if you play thousands of hands, the 35% comes up a lot. And so, you know, you did everything right, and you can’t control the turn of the cards. You learn that through example. But, you know, I think we all have to acknowledge that, like, luck plays a role in our lives. Being in the right place at the right time counts for a lot. Almost by definition, if you’re a very successful person, you probably both are lucky and good.

I mean, you’re probably lucky to be born into a country at a time where there’s a lot of economic opportunity, and you’re lucky to have your health and your support network and things like that. And so appreciating that, I think, is a healthy mentality, as well.

Brett McKay: Yeah. So resulting is judging the quality of a decision by its outcome, and that can lead to faulty thinking, because, you know, sometimes things turn out well for you, but it’s not because of anything you did. You just got lucky. But also, something can go badly, but you actually made a good decision. It just didn’t go your way for, you know, whatever random reason.

Nate Silver: Yeah, I mean, you see this. I’m a, I’m a Detroit Lions fan. You see, you know, Dan Campbell was criticized for aggressive play-calling and going for it on fourth down. But, like, you know, you have to take risk, and you have to make the best decision that you can in the long run and not be embarrassed by failure and not be embarrassed by sometimes even looking foolish because, you know, look, if we all had perfect information, if we knew how everything was going to turn out, then a, the world wouldn’t be very interesting or fun. But also, you know, if you’re working in finance or poker or whatever else or investment, you have to take the opportunity before other people do. You can’t wait for the perfect academic model to come in and perfectly solve the answer because by that point, the more aggressive players in the market will already have squeezed all the juice out of the lemon. And so be willing to work with incomplete information.

And make your best estimate. And if you’re wrong, by the way, you should double-check your process. If you’re wrong, if you’re consistently wrong, in particular, if you’re getting things wrong over and over again, then maybe your process is bad. But most people are too results-oriented and not process-oriented enough.

Brett McKay: Yeah. The example Annie Duke uses is Pete Carroll in the Super Bowl in 2015. So it’s the fourth quarter, less than a minute left. The Seahawks need a touchdown. They’re on the one-yard line of the Patriots, and everyone expects Carroll to call a running play ’cause they got, they got one of the best running backs in the league. But he calls a pass play, intercepted, game over. And after that, everyone just goes crazy saying like, “Oh, it’s the worst decision ever.” But if you look at the actual statistics and the probabilities, like, the decision made sense. It was a good decision. And if you’d won the Super Bowl, people would have said, yeah, that was a great decision. So another habit you talk about is a successful risk taker takes a raise or fold attitude toward life.

Nate Silver: This is partly what I talked about before with HR McMaster on the battlefield. You don’t want to get stuck in the middle sometimes. I mean, and often in poker, if I go, sometimes in the summer, I’ll deal, like, a backyard game at my friend’s apartment in Brooklyn. And this is with people who have never played poker before, except maybe once a summer when we play. And really inexperienced poker players are uncertain, and so what they wind up doing is calling a lot or checking the in-between passive actions instead of the bolder actions of raising or folding. Folding, quitting can sometimes be a bad action. You may have talked to Annie Duke about this. Her book ‘Quit’ in general, people are happier when they make a change if they think they’re unhappy in a relationship or a job or they want to move cities or something or change their lifestyle. Usually, if you talk to them afterward, they’re happy they made that decision. I think it’s also kind of partly a matter of cultivating a few things in life that you specialize in, I think, where you can have more of a comparative advantage over the field, I think is usually more worthwhile than trying to be like a jack of all trades.

Brett McKay: And you talk about Andrew Luck, the football player, kind of using this principle in his own career. Tell us about that.

Nate Silver: Yeah, so very successful Stanford graduate, Indianapolis Colts quarterback, but had a bad offensive line, was injured a lot, and to many people’s surprise, retired when he was age, I think 29 or 30 when he still had probably half his career left. And he said, “Look, I have a newborn on the way for the time being. I have my health. I’m a smart dude. I went to Stanford and I’ve had a great career, but I want to make sure I have a good life for the rest, 50, 60 years of my life. I don’t have to prove anything to anybody.” And the NFL player I talk to in the book, Dave Anderson, who is kind of a guy who is more on the margins of the sport, kind of a Wes Welker short slot receiver type, but like, in a lot of training camp battles to gain starting time and things like that, he’s like, You know what? I admire Andrew Luck because there’s no particular honor if you go through and get hurt. And by the way, Dave’s ex-friends, ex-teammates, I mean, a lot of them suffered physically from the NFL. It’s a, it’s a, it’s a sport where you’re taking real physical risk and your body is grinded down.

And so he’s like, I admire the guys who do that, but if you’re a guy who found success and you’re willing to say, I want to, you know, get some mileage and have a wonderful life for my next 50 years, then he admires that too.

Brett McKay: Yeah. So Luck folded ’cause he saw the expected value is like, “It’s better if I just quit this NFL thing and do something else.” And the call thing would have been like, “I’m going to keep the career going. Maybe I go to a different team with a better offensive line and maybe I can make it work.” He’s like, “Ah, no, I’ll just quit this.”

Nate Silver: Yeah, I mean, maybe call, or maybe that would be raising actually, right? To say that, “Okay, I’m going to demand a trade and improve my situation,” whereas calling is kind of muddling through for another season when you’re worried about, and by the way, I think often when people are in a situation, they’re unhappy. And, I mean, that’s reflected in inferior performance. You know, people can even have a tendency to like, you see this in poker tournaments sometimes where a player’s made the third day of a tournament, but then he’s getting stressed out. Maybe he’s having to miss days of work, or maybe he’s homesick, or maybe he feels like he’s accomplished enough and has a little bit of like survivor’s guilt or imposter syndrome and they’ll self-sabotage or even things like, if you’re playing poker and you didn’t eat a good lunch and you’re thinking, “Boy, it wouldn’t be nice to have like a burger and like a beer or something, right.” You’ll find ways to like and fly home on the red eye. You’ll find ways to self-sabotage if you’re in a situation where you’re not able to be fully present.

Brett McKay: Yeah, this can happen in your career. You hate your job, but instead of either folding or raising, you just kind of keep muddling along to see if you can make this work and you’re just miserable.

Nate Silver: Yeah. That’s when you start to make mistakes. And as someone who’s done a lot of different things in life and had a lot of different careers, I mean, I just know kind of from experience that, like, I can be, like, literally five or ten times more productive when I’m happy and engaged than when I’m trying to muddle through.

Brett McKay: Yeah. So another rule is, or another habit you found that successful risk takers had is successful risk takers are prepared. And you talked to a, did you talk to a fighter pilot about this?

Nate Silver: Yeah, I talked to Victor Vescovo is the name of the explorer I talked to earlier. So he’s been to, like, the seven highest peaks on each continent. But before that, he was a fighter pilot and also taught other pilots at what’s kind of informally called the Top Gun Academy. So I talked to him shortly after ‘Top Gun: Maverick’ came out, and I kind of asked him what he thought about that movie. And he’s like, Yeah, Maverick is actually kind of bullshit, right? ‘Cause Tom Cruise is telling people, don’t overprepare and just kind of trust your gut and wing it a little bit more. I mean, I guess this gets a little bit to the skiing thing where sometimes you do have to let go and be immersed in the situation. But military missions, you know, missions to execute some tactical strike are meticulously planned out. And what you find is that when you’re planning out, plan for the everyday eventualities, and you’re actually better prepared when something unexpected happens. You’re not wasting bandwidth with the basic blocking and tackling stuff. You know how to execute and fly the jet home and turn around if you need to.

So you have more of your attention. I mean, attention’s a scarce resource. People forget that. Like, people say, “Why did you pay attention to this or that?” Well, it’s ’cause, like, attention is a scarce resource and the human mind can do amazing things when it’s focused. And so clearing up mental bandwidth with preparation for dealing with emergency situations or dealing with amazing opportunities is a really important life skill.

Brett McKay: Yeah, see, Eisenhower famously said, “Plans are useless, but planning is everything.”

Nate Silver: Perfect. I love that quote.

Brett McKay: And then something else I was fascinated by in the book when you’re talking about this world of poker, something that’s happened in the past 15, 10 years that’s made poker players better, is this development of poker simulators or software. Tell us about this. I thought it was really interesting because I think this kind of goes along with you’re preparing so you can make those more intuitive decisions when you need to.

Nate Silver: Yeah. So these are called solvers is the name where they literally use lots of fancy technology to calculate what the optimal play is. The game theory optimal play is for poker in any given situation. Now, it’s not as easy as it sounds because it’s this complicated, literally like 13 by 13 matrix. And sometimes there are multiple best plays that you’re equally good to raise or call, for example. But that’s a matter of preparation, right, because your opponent’s not going to play as well as a computer. However, understanding what the theoretically correct play is allows you to deviate and make an exploit. And I talked about before where I made this bluff. Like, I knew that was probably a pretty dubious bluff if I was playing against the computer and I incorrectly guessed that my friend would not be playing like a computer, and instead he made the right play and called. But that was a self-aware, a self-aware attempt to… The poker term for it is, exploit my opponent. He didn’t fall for it. You take chances in poker, they don’t always work out. But it was a studied play where I knew why I was making an unusual choice.

Brett McKay: How have you seen these solvers change the world of poker since you’ve been playing?

Nate Silver: Oh, man. I mean, just like the level of sophistication, at least for the top half of the playing pool is just much better. You might see some, like, old guy who you think hasn’t played a hand other than Aces or Kings in six years, right? And all of a sudden they’re bluff raising and talking about solver outputs that they’re looking at. So for a certain type of, like, studious player, maybe not someone who’s playing professionally, although the professionals use this too, obviously, but it really helps lift your game up if you’re someone who has a busy life, as I’m sure many of your listeners do, but wants to really raise the floor and how well they play, like developing intuitions from playing with solvers is something that I would recommend.

Brett McKay: Yeah, I’ve heard people talk about this, how AI might replace some stuff, but artificial intelligence, you’re going to get the most out of it if you combine artificial intelligence with human intelligence. Chess playing, I guess the best chess players are the ones who use AI and human ability. I don’t know if that’s…

Nate Silver: Yeah, no, look, they’re studying the computer sims, and the computers are better at chess than the best human players. But, you know, again, like Magnus Carlsen or someone can also make exploitive plays. It can say, “I bet my opponent won’t be prepared for this line that I’m going to take.” And so, even though I know this line is not optimal as computer would play, I think it’s actually optimal against another human being.

Brett McKay: Yeah, so, okay, the lesson there, just over-prepare, because that over-preparation will allow you to exploit when you need to, ’cause it allows you to make those intuitive decisions when things are on the line.

Nate Silver: Yeah, look, I mean, these poker players today, they’re all, you know, they’re all very smart, but they’re spending a lot of time off the felt studying because you just have to be realistic, right? You can be a smart, accomplished person if you’re going to the arena where you’re selecting for all the other smart, accomplished people who are playing the same game as you, and they’re playing ’cause they think they’re going to win your money. Right? You know, what makes you better than them? Well, maybe you’re not. But to have any hope of competing, then you have to be rigorous and studious and not just wing it.

Brett McKay: So, another habit is successful risk-takers have a selectively high attention to detail. What’d you learn about this from that astronaut?

Nate Silver: Well, I mean, her phrase is the most important thing is to know what to pay attention to, right? She put it in a more eloquent way, which I’m spacing on, no pun intended, for a minute, but if you literally go in the space shuttle, there are 84 different dials, knobs, and bleeping indicators, and things like that. And understanding what you’re focused on, you have a mission, but when something goes wrong, you have to pay attention to that. And when something goes wrong, while you’re trying to solve the thing that goes wrong, you have to know, kind of what demands the most of your attention at any given time. I think you also have to learn how to pace yourself. You know, in poker, you might only face one really important decision every hour or every half hour, every 2 hours, but that one decision might have 100 times or a thousand times the value of an ordinary kind of low-stakes decision. And so, learning how to, like, pace yourself again, that can involve mental and even physical health to some degree. But understanding that, like, you know, if you play in a poker tournament, especially when you get toward the end of a tournament where it might just be two or three or four players left it’s quite draining.

I’ll have situations where I’ve been playing in an intense tournament. I’m like, okay, I finally got knocked out, but I won some prize. That’s great. I’m gonna go meet my friend for a beer and relax. Right? You kind of make it halfway back to your hotel room, and you’re, like, ready to fall asleep ’cause you kind of left it all on the line. And paying attention is physically taxing.

Brett McKay: No, yeah, you talk about, a lot of poker players talk about the game being hours of boredom punctuated by moments of sheer terror because, yeah, most of the time, it’s just like you’re nothing’s really happening. And that can lull you into this sort of complacency where you stop paying attention and then you miss something where you could have won big.

Nate Silver: For sure. And picking up on physical reads on your opponent. I mean, one thing that you’ll discover is that if you are in a situation, ’cause poker, if you’re just playing a low stakes game, you’re chatting in between hands, you’re checking your phone, right, you’re watching sports on TV, etcetera, you’re killing some time. When you do play a high-stakes game or get deep in a tournament, all of a sudden you find that all this other stuff that you’re ignoring, there’s a lot of information there about the way people are putting their chips into the pot, and you’re thinking ahead toward what if they bet this amount if this card comes. And all of a sudden, when the decisions really are high stakes and they matter, then you find there is lots of things that you’re kind of shutting out most of the time in everyday life, and that’s okay. I mean, we can’t all be going at full speed 24/7 but knowing how to pace yourself and knowing when you have to turn on and be at a high attentive level is being prepared to do that and healthy enough to do that is important.

Brett McKay: So another habit that I liked was successful risk-takers are good estimators. And with this habit, you say that good risk-takers are Bayesians. What do you mean by that?

Nate Silver: So Bayes’ theorem comes from the Reverend Thomas Bayes. This is, I guess, the 17th century, who came up with a formula called Bayes’ theorem, which is about updating information based on incomplete information. So if you go to, like, a dinner party or some social event with someone you don’t know very well, and you’re trying to be a sympathetic, friendly guest, this is an example of a kind of Bayesian process where you start out knowing not very much at all. You’re probably being pretty cautious and pretty polite, but then you found out that actually you went to the same high school or you work for the same sports team, or maybe your wives or partners have something in common, or you have a shared interest, and so you adapt and adjust in a very natural way. In some ways, it’s like actually a very intuitive process. In poker, it can be a little bit more rigorous where you are actually trying to estimate a probability. If you’re. If someone goes all-in on the river and you have to be right 35% of the time to make the call, well, then knowing if you’re right 40% or 30% is important.

So, developing practice at, like, mathematically estimating things right. It’s an annoying habit. If I go to, like, an NBA game, I’m a Knicks fan, for example, I can estimate pretty well. The Knicks are down five points with six minutes to go in the fourth quarter. I can usually estimate pretty well what their chances are of winning. Not well enough to necessarily bet blindly at FanDuel or something, but enough that I’m always thinking in terms of probabilities.

Brett McKay: Is this a skill that you can get better at?

Nate Silver: Oh, 100%. I mean, it’s drilled into poker players’ heads through playing tens of thousands of hands. And it’s 100% something that you’ve learned through practice.

Brett McKay: Yeah. Something I’ve been thinking about lately is I wish I was better at thinking more probabilistically. I mean, I think I might do it intuitively. I’m not very explicit about it. I’d love to be able to take sort of those intuitive probable decisions that I make and make it explicit. Any advice on how to do that?

Nate Silver: I mean, again, it’s partly having enough practice where you’ve kind of experienced both the good outcomes and the bad outcomes, so you kind of see where your expected value ends up over the long run. And by the way, this is meant for decisions that you are able to make repeated times when it’s things that are one-offs, like who should I get married to? Or things like that. Should I make a major life-altering course of action, then I’m less concerned about how people make their decisions. But things where you get more than one crack at the apple, if you’re, if you’re an investor in Silicon Valley, you’re going to make dozens and dozens of investments over the course of your career. And so, again, being process-oriented and learning from that and trusting the process.

Brett McKay: Yeah. So, another one that you talked about is successful risk-takers are conscientiously contrarian. What do you mean by that?

Nate Silver: So, a lot of people in the river, being kind of lone wolf types, tend to be contrarian. And they say, if you want vanilla, I want chocolate, and vice versa. That can sometimes get them in trouble. I mean, sometimes these, like, founders can be jerks, assholes, even they can be difficult people. But what you want is you want to have a sense for, like, why are someone’s incentives different than mine? That’s the conscientious part. So I talked to one friend of mine who works for a hedge fund, and they try to find out when people have, like, bad reasons for making stock trades. So if, for example, you have a company where an equity founder has a bunch of equity locked up until x date, until August 1st or something like that, then on August 1st, they’re allowed to sell their shares. If you know that they’re making a non-plus EV, expected value, I shouldn’t use the EV jargon, a non-expected value-based decision, then that creates an opportunity to exploit them potentially.

I find this in politics a lot, as I will get in battles with people on Twitter and whatnot, ’cause I’m trying to forecast elections. I’m trying to understand what the likelihood is that Democrats or Republicans will win, and they’re trying to be partisan or something, which is fine, but we’re playing different games. Someone’s playing a different game is when you can be better at… What you’re trying to accomplish.

Brett McKay: Well, Nate, this has been a great conversation. Where can people go to learn more about the book and your work?

Nate Silver: So, the book is called On the Edge: The Art of Risking Everything, and my newsletter is called Silver Bulletin. It’s on Substack, natesilver.net.

Brett McKay: Well, Nate Silver, thanks for your time. It’s been a pleasure.

Nate Silver: Thanks so much, Brett.

Brett McKay: My guest today was Nate Silver. He’s the author of the book On the Edge. It’s available on Amazon.com and bookstores everywhere. You can find more information about his work at his website, natesilver.net. Also, check out our show notes at AoM.is/risktakers, where you find links to resources. We delve deeper into this topic. Well, that wraps up another edition of the AoM podcast. Make sure to check out our website at artofmanliness.com, where you’ll find our podcast archives as well as thousands of articles that we’ve written over the years about pretty much anything you can think of. And if you haven’t done so already, I’d appreciate it if you take one minute to give us a review on the podcast or Spotify. Helps out a lot. And if you’ve done that already, thank you so much. Please consider sharing the show with a friend or family member who you think needs something out of it. As always, thank you for the continued support. And until next time, this is Brett McKay reminding you to not listen to anyone on podcasts but put what you’ve heard into action.